On the fence: If this is a crypto bear market, how long can it last?

It has now been three months since Bitcoin’s price peaked at an all-time high just shy of $65,000. For most of the last two months, Bitcoin (BTC) has been trading in the $30,000–$40,000 range, as much as 54% lower than its peak

The downturn came at a time when many analysts were predicting exactly the opposite — a bull cycle set to run to new record highs within months — with some even speculating that a six-figure BTC price would materialize this year.

So, what’s going on? Is the current market downturn just a blip on an otherwise upward trajectory, or is the crypto market back in the kind of long-term bearish territory last seen in 2018?

Bullish metrics

Bitcoin’s historical price activity has a compelling correlation with its halving cycles, with previous all-time highs being reached within around 12 to 18 months of a halving. PlanB, the creator of the Stock-to-Flow BTC price model, is among the most vocal proponents of this. On Twitter, the analyst remains resolute that the Stock-to-Flow Cross Asset Model (S2FX) predicts further bullish action, pointing to similar temporary downturns before epic rallies in previous cycles.

So far, the S2FX model has been one of the most accurate price predictors of Bitcoin over the years. In addition, on-chain metrics appear to support the theory that bearish sentiments could be short-lived. For instance, shortly after Bitcoin’s April price peak, traders suddenly started moving funds onto exchanges, ending an almost uninterrupted eight-month run of HODLing.

Igneus Terrenus, head of communications at crypto exchange Bybit, believes that short-term traders were responsible for the sell-off following BTC’s price highs. He told Cointelegraph:

“A series of deleveraging events shook off many short-term speculators, whose capitulation accounts for the majority of realized losses in recent months. While the euphoria at the start of the year has all but dissipated, whales and long-term holders have remained confident through the market’s overall bearish sentiments.”

However, over the recent weeks, trading platforms have once again seen funds flowing out. Glassnode’s Realized HODL Ratio, which tracks the willingness of investors to let go of their holdings, also appears to reflect similar patterns seen in previous cycles.

Richard Nie, chief research analyst at Bingbon, believes that the exchange flows are telling. Speaking to Cointelegraph, he concurred that the metrics indicate a bullish shift. “We ought to pay attention to the number of whale holders and the amount of BTC held by exchanges,” he said, adding that as “more BTC is withdrawn from exchanges and moved into private addresses, this is a strong bullish signal.”

Mati Greenspan, founder and CEO of Quantum Economics, told Cointelegraph: “Right now crypto volumes across exchanges are the lowest they’ve been all year. Once trading picks up again, that would be a good indication the lull is complete.”

Broader bullish indicators

Project funding is another significant indicator of market sentiment, and 2021 has been an outstanding year for crypto startups. As reported by Cointelegraph, the crypto industry saw more funding in the first quarter of 2021 than in all of 2020 put together, pulling in $2.6 billion.

The downturn since April doesn’t appear to have spoiled the appetites of venture capitalists at all. In late May, stablecoin issuer Circle raised $440 million, and only days later, Mike Novogratz’s Cryptology Asset Group announced it was launching a crypto investment fund worth $100 million.

By mid-June, Bloomberg had reported that the total venture capital investment in crypto for the year was already up to over $17 billion. Even discounting the $10 billion that Block.one directed into its new exchange venture, it’s sufficient to demonstrate that the crypto market’s second-quarter performance hasn’t yet affected the growth in venture capital investment.

There are also macro market factors to consider….